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March 2013

Debit notes issued by the service provider. No formal Invoice, Bill or challan issued. Can such debit note be considered as a valid document to avail CENVAT credit – Held, yes.

By Puloma Dalal, Jayesh Gogri, Chartered Accountants
Reading Time 1 mins
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Facts

The service provider raised debit notes for provision of services instead of raising an Invoice or a challan. The Appellant having availed CENVAT credit on the basis of such debit notes, the Respondent objected to the same stating that they were not eligible documents as prescribed under Rule 9(1)(f) and disallowed the credit. Whether is it necessary to verify that service tax is paid by the vendor before claiming the CENVAT credit?

Held

The Honourable Tribunal allowed the CENVAT credit by applying the principle of Substance over Form. It stated that “a ‘bill’ is that which gives right to an actionable claim”. A party raising the bill communicates its intention to the recipient of such service, making him aware of his contractual obligation and value involved to provide such service. The Appellant cannot be denied benefit of CENVAT credit in case of reimbursement of expenses as it is already included in the taxable value. The Tribunal in this regard held that the department on its own can verify the claim and in the event of failure of such verification, the law will take its own recourse.

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